[Federal Register Volume 62, Number 163 (Friday, August 22, 1997)]
[Rules and Regulations]
[Pages 44819-44821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21494]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 9 and 19

[FAC 97-01; FAR Case 96-002; Item IX]
RIN 9000-AH66


Federal Acquisition Regulation; Certificate of Competency

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed on an interim rule amending 
the Federal Acquisition Regulation (FAR) to implement revisions made to 
the Small Business Administration's regulations covering the 
procurement assistance programs. This regulatory action was not subject 
to Office of Management and Budget review under Executive Order 12866, 
dated September 30, 1993, and is not a major rule under 5 U.S.C. 804.

DATES: Effective date: August 22, 1997

    .Comment Date: Comments should be submitted to the FAR Secretariat 
at the address shown below on or before October 21, 1997 to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVRS), 1800 F Street, 
NW, Room 4035, Washington, DC 20405.
    E-Mail comments submitted over the Internet should be addressed to: 
[email protected].
    Please cite FAC 97-01, FAR case 96-002 in all correspondence 
related to this case.

FOR FURTHER INFORMATION CONTACT:  The FAR Secretariat, Room 4035, GS 
Building, Washington, DC 20405 (202) 501-4755 for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Victoria Moss, Procurement Analyst, at (202) 501-
4764. Please cite FAC 97-01, FAR case 96-002.

SUPPLEMENTARY INFORMATION: 

A. Background

    This interim rule amends FAR Parts 9 and 19 to comply with 
revisions made to the Small Business Administration's (SBA) procurement 
assistance programs contained in 13 CFR Part 125 (61 FR 3310, January 
31, 1996). This rule increases the threshold over which contracting 
officers may appeal the award of a Certificate of Competency (COC) from 
$25,000 to $100,000; updates the names of SBA offices involved in 
processing COCs; and implements the requirement that compliance with 
the limitations on subcontracting be considered an element of 
responsibility. Also, this interim rule removes language implementing 
Section 15(c) of the Small Business Act (15 U.S.C. 644(c)) as amended 
by Section 305 of Public Law 103-403, Small Business Administration 
Reauthorization and Amendments Act of 1994. Section 305, which 
authorized public and private organizations for the handicapped to 
participate in acquisitions set aside for small businesses, has 
expired.

B. Regulatory Flexibility Act

    This interim rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule 
does not impose any new requirements on contractors, large or small. 
The Small Business Administration has certified that the revisions to 
13 CFR 125 being implemented by this rule will not have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act. An initial regulatory 
flexibility analysis has therefore not been performed. Comments are 
invited from small businesses and other interested parties. Comments 
from small entities concerning the affected FAR subparts also will be 
considered in accordance with 5 U.S.C. 610. Such comments must be 
submitted separately and cite 5 U.S.C. 601, et seq. (FAC 97-01, FAR 
case 96-002) in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose recordkeeping or information collection 
requirements, or collections of information from offerors, contractors, 
or members of the public which require the approval of the Office of 
Management and Budget under 44 U.S.C. 3501, et seq.

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary to conform the Federal Acquisition Regulation to revisions 
made in 13 CFR Part 125, pertaining to the Small Business 
Administration (SBA) procurement assistance programs. The SBA revisions 
became effective on March 1, 1996. However, pursuant to Public Law 98-
577 and FAR 1.501, public comments received in response to this interim 
rule will be considered in formulating the final rule.

List of Subjects in 48 CFR Parts 9 and 19

    Government procurement.

    Dated: August 7, 1997.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, 48 CFR Parts 9 and 19 are amended as set forth below:
    1. The authority citation for 48 CFR Parts 9 and 19 continues to 
read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 9--CONTRACTOR QUALIFICATIONS

    2. Section 9.103 is amended in paragraph (b) by revising the third 
sentence to read as follows:


9.103  Policy.

    (b) * * * If the prospective contractor is a small business 
concern, the contracting officer shall comply with subpart 19.6, 
Certificates of Competency and Determinations of Responsibil-
 * * *
* * * * *
    3. Section 9.104-3 is amended in paragraph (a) by adding a sentence 
at the end, and in paragraph (d) by redesignating the text as paragraph

[[Page 44820]]

(d)(1) and by adding (d)(2) to read as follows:


9.104-3  Application of standards.

    (a) * * * Consideration of a prime contractor's compliance with 
limitations on subcontracting shall take into account the time period 
covered by the contract base period or quantities plus option periods 
or quantities, if such options are considered when evaluating offers 
for award.
* * * * *
    (d) * * * (1) * * *
    (2) A small business that is unable to comply with the limitations 
on subcontracting at 52.219-14 may be considered nonresponsible.

PART 19--SMALL BUSINESS PROGRAMS


19.001  [Amended]

    4. Section 19.001 is amended by removing definitions for 
``Handicapped individual'' and ``Public or private organization for the 
handicapped'', and in the definition of ``Nonmanufacturer rule'' by 
removing ``121.906'' and inserting ``121.406'' in its place.


19.201  [Amended]

    5. Section 19.201(c) is amended in the introductory text by 
removing ``and 13 CFR 125.4(g)(7)''.


19.302  [Amended]

    6. Section 19.302 is amended:
    (a) In paragraph (c)(1) by removing the word ``Regional'' and 
inserting ``Area'' in its place;
    (b) In the introductory text of paragraph (d) by removing ``13 CFR 
121.9'' and inserting ``13 CFR 121.10'' in its place;
    (c) In paragraphs (g)(2) and (i)(1) by removing ``Regional 
Administrator'' and inserting ``Area Director'' in its place;
    (d) In (i)(2) by removing ``a Regional Administrator's'' and 
inserting ``an Area Director's'' in its place;
    (e) In (i)(3) by removing ``121.11'' and inserting ``121.1001'' in 
its place; and
    (f) In (j), in the first and third sentences, by removing the word 
``regional'' and inserting ``area'' in its place; and in the first 
sentence parenthetical by removing ``above'' and inserting ``of this 
section'' in its place.
    7. Section 19.508(e) is revised to read as follows:


19.508  Solicitation provisions and contract clauses.

* * * * *
    (e) The contracting officer shall insert the clause at 52.219-14, 
Limitations on Subcontracting, in solicitations and contracts for 
supplies, services, and construction, if any portion of the requirement 
is to be set aside for small business and the contract amount is 
expected to exceed $100,000.

Subpart 19.6--Certificates of Competency and Determinations of 
Responsibility

    8. The heading of Subpart 19.6 is revised to read as set forth 
above.
    9. Section 19.601 is amended by revising paragraph (a); by 
redesignating (c) as (e); and by adding new paragraphs (c) and (d) to 
read as follows:


19.601  General.

    (a) A Certificate of Competency (COC) is the certificate issued by 
the Small Business Administration (SBA) stating that the holder is 
responsible (with respect to all elements of responsibility, including, 
but not limited to, capability, competency, capacity, credit, 
integrity, perseverance, tenacity, and limitations on subcontracting) 
for the purpose of receiving and performing a specific Government 
contract.
* * * * *
    (c) The COC program is applicable to all Government acquisitions. A 
contracting officer shall, upon determining an apparent successful 
small business offeror to be nonresponsible, refer that small business 
to the SBA for a possible COC, even if the next acceptable offer is 
also from a small business.
    (d) When a solicitation requires a small business to adhere to the 
limitations on subcontracting, a contracting officer's finding that a 
small business cannot comply with the limitation shall be treated as an 
element of responsibility and shall be subject to the COC process. When 
a solicitation requires a small business to adhere to the definition of 
a nonmanufacturer, a contracting officer's determination that the small 
business does not comply shall be processed in accordance with subpart 
19.3.
* * * * *
    10. Section 19.602-1 is amended by revising the introductory text 
of paragraphs (a) and (a)(2), (c) introductory text, and (c)(2); and by 
adding (e) to read as follows:


19.602-1  Referral.

    (a) Upon determining and documenting that an apparent successful 
small business offeror lacks certain elements of responsibility 
(including, but not limited to, capability, competency, capacity, 
credit, integrity, perseverance, tenacity, and limitations on 
subcontracting), the contracting officer shall--
* * * * *
    (2) Refer the matter to the cognizant SBA Government Contracting 
Area Office (Area Office) serving the area in which the headquarters of 
the offeror is located, in accordance with agency procedures, except 
that referral is not necessary if the small business concern--
* * * * *
    (c) The referral shall include--
* * * * *
    (2) If applicable, a copy of the following:
    (i) Solicitation.
    (ii) Final offer submitted by the concern whose responsibility is 
at issue for the procurement.
    (iii) Abstract of bids or the contracting officer's price 
negotiation memorandum.
    (iv) Preaward survey.
    (v) Technical data package (including drawings, specifications and 
statement of work).
    (vi) Any other justification and documentation used to arrive at 
the nonresponsibility determination.
* * * * *
    (e) Contract award shall be withheld by the contracting officer for 
a period of 15 business days (or longer if agreed to by the SBA and the 
contracting officer) following receipt by the appropriate SBA Area 
Office of a referral that includes all required documentation.
    11. Section 19.602-2 is revised to read as follows:


19.602-2  Issuing or denying a Certificate of Competency (COC).

    Within 15 business days (or a longer period agreed to by the SBA 
and the contracting agency) after receiving a notice that a small 
business concern lacks certain elements of responsibility, the SBA Area 
Office will take the following actions:
    (a) Inform the small business concern of the contracting officer's 
determination and offer it an opportunity to apply to the SBA for a 
COC. (A concern wishing to apply for a COC should notify the SBA Area 
Office serving the geographical area in which the headquarters of the 
offeror is located.)
    (b) Upon timely receipt of a complete and acceptable application, 
elect to visit the applicant's facility to review its responsibility.
    (1) The COC review process is not limited to the areas of 
nonresponsibility cited by the contracting officer.
    (2) The SBA may, at its discretion, independently evaluate the COC 
applicant for all elements of responsibility, but may presume 
responsibility exists as to elements other than those cited as 
deficient.

[[Page 44821]]

    (c) Consider denying a COC for reasons of nonresponsibility not 
originally cited by the contracting officer.
    (d) When the Area Director determines that a COC is warranted (for 
contracts valued at $25,000,000 or less), notify the contracting 
officer and provide the following options:
    (1) Accept the Area Director's decision to issue a COC and award 
the contract to the concern. The COC issuance letter will then be sent, 
including as an attachment a detailed rationale for the decision; or
    (2) Ask the Area Director to suspend the case for one or more of 
the following purposes:
    (i) To permit the SBA to forward a detailed rationale for the 
decision to the contracting officer for review within a specified 
period of time.
    (ii) To afford the contracting officer the opportunity to meet with 
the Area Office to review all documentation contained in the case file 
and to attempt to resolve any issues.
    (iii) To submit any information to the SBA Area Office that the 
contracting officer believes the SBA did not consider (at which time 
the SBA Area Office will establish a new suspense date mutually 
agreeable to the contracting officer and the SBA).
    (iv) To permit resolution of an appeal by the contracting agency to 
SBA Headquarters under 19.602-3. However, there is no contracting 
officer's appeal when the Area Office proposes to issue a COC valued at 
$100,000 or less.
    (e) At the completion of the process, notify the concern and the 
contracting officer that the COC is denied or is being issued.
    (f) Refer recommendations for issuing a COC on contracts greater 
than $25,000,000 to SBA Headquarters.
    12. Section 19.602-3 is revised to read as follows:


19.602-3  Resolving differences between the agency and the Small 
Business Administration.

    (a) COCs valued between $100,000 and $25,000,000. (1) When 
disagreements arise about a concern's ability to perform, the 
contracting officer and the SBA shall make every effort to reach a 
resolution before the SBA takes final action on a COC. This shall be 
done through the complete exchange of information and in accordance 
with agency procedures. If agreement cannot be reached between the 
contracting officer and the SBA Area Office, the contracting officer 
shall request that the Area Office suspend action and refer the matter 
to SBA Headquarters for review. The SBA Area Office shall honor the 
request for a review if the contracting officer agrees to withhold 
award until the review process is concluded. Without an agreement to 
withhold award, the SBA Area Office will issue the COC in accordance 
with applicable SBA regulations.
    (2) SBA Headquarters will furnish written notice to the procuring 
agency's Director, Office of Small and Disadvantaged Business 
Utilization (OSDBU) or other designated official (with a copy to the 
contracting officer) that the case file has been received and that an 
appeal decision may be requested by an authorized official.
    (3) If the contracting agency decides to file an appeal, it must 
notify SBA Headquarters through its procuring agency's Director, OSDBU, 
or other designated official, within 10 business days (or a time period 
agreed upon by both agencies) that it intends to appeal the issuance of 
the COC.
    (4) The appeal and any supporting documentation shall be filed by 
the procuring agency's Director, OSDBU, or other designated official, 
within 10 business days (or a period agreed upon by both agencies) 
after SBA Headquarters receives the agency's notification in accordance 
with paragraph (a)(3) of this subsection.
    (5) The SBA Associate Administrator for Government Contracting will 
make a final determination, in writing, to issue or to deny the COC.
    (b) SBA Headquarters' decisions on COCs valued over $25,000,000. 
(1) Prior to taking final action, SBA Headquarters will contact the 
contracting agency and offer it the following options:
    (i) To request that the SBA suspend case processing to allow the 
agency to meet with SBA Headquarters personnel and review all 
documentation contained in the case file; or
    (ii) To submit to SBA Headquarters for evaluation any information 
that the contracting agency believes has not been considered.
    (2) After reviewing all available information, the SBA will make a 
final decision to either issue or deny the COC.
    (c) Reconsideration of a COC after issuance. (1) The SBA reserves 
the right to reconsider its issuance of a COC, prior to contract award, 
if--
    (i) The COC applicant submitted false information or omitted 
materially adverse information; or
    (ii) The COC has been issued for more than 60 days (in which case 
the SBA may investigate the firm's current circumstances).
    (2) When the SBA reconsiders and reaffirms the COC, the procedures 
in subsection 19.602-2 do not apply.
    (3) Denial of a COC by the SBA does not preclude a contracting 
officer from awarding a contract to the referred concern, nor does it 
prevent the concern from making an offer on any other procurement.

[FR Doc. 97-21494 Filed 8-21-97; 8:45 am]
BILLING CODE 6820-EP-P